Quick Bite – If Gold is Good, is Silver Better?

Over the past 12 months, we have written numerous Quick Bites about the advantages of investing a proportion of one’s portfolio in gold for purposes of diversification. Fortunately, it has been a very good call, and gold has risen around 40% over the last year, driven largely by central bank buying, hedging demand against geopolitical risks and the debasement of fiat currencies.

But what about silver? Over the past year, it has risen by only 15%.

Source: Callum Thomas, Topdown Charts

The gold-to-silver ratio is a key metric used by precious metal investors to assess the relative value of gold versus silver, calculated by dividing the price of one ounce of gold by the price of one ounce of silver. As of 4 June 2025 (time of writing), with gold trading at approximately $3,363 (USD/t.oz) and silver at $34.58 (USD/t.oz), the gold-to-silver ratio stands at around 97:1. This is notably high compared to the historical average of 55-60 over the past 50 years, suggesting silver is undervalued relative to gold. Historically, when the ratio exceeds 80, it often signals a potential for silver to outperform gold as the ratio tends to revert toward its mean over time.

To evaluate whether it’s a good time to buy silver (let’s say, on a 3 year view), we must consider macroeconomic factors, market trends, and silver’s unique drivers. Silver has dual demand as both a precious metal and an industrial commodity, with 50-60% of its use tied to industries like solar panels and electronics. Industrial demand has been robust, with record consumption in 2022, and continued growth is expected due to global energy transitions.

Additionally, inflation expectations, a key driver for precious metals, remain supportive. Historical data shows silver often lags gold in early bull markets but can outperform during later stages, with 80-90% of price gains occurring in the final stages of a bull run. Given gold’s confirmed bull market and silver’s breakout above $30/oz, a target of $50/oz by 2027 is plausible, especially if inflation persists or economic recovery boosts industrial demand. However, silver’s volatility is higher than gold (19% vs. gold’s 9%) so the ride will likely be bumpier along the way, particularly if the US dollar strengthens significantly.

Source: Yardeni Research

How would one gain exposure?

Both BHP and Rio Tinto have some indirect exposure to silver. While not primarily silver producers, both companies generate silver as a by-product of their copper and iron ore operations. BHP’s Olympic Dam operation, for example, is primarily a copper mine, but also produces significant amounts of silver. Rio Tinto also has silver production from its copper and iron ore operations. But neither company is specifically focused on silver. There are smaller mining operators listed on the ASX that do focus on silver, such as South32 Ltd (ASX:S32) and 29Metals Limited (ASX:29M), but they tend to be higher risk investments.

Fortunately, there are also specific ETFs which track the silver price. ETFs have become increasingly popular as a convenient way of focused investing, avoiding the problems associated with specific mining operations or the logistics of physically holding the metal.

In conclusion, the high gold-to-silver ratio and strong fundamentals suggest silver is certainly interesting, especially over the medium term. These 3 factors are positive:

• Supply Deficits: The silver market has experienced structural deficits for 5 consecutive years, with demand consistently outpacing supply. This trend is expected to continue, potentially exerting upward pressure on prices.
• Industrial Demand: Silver’s extensive use in industrial applications is predicted to drive demand, particularly in solar panels and emerging technologies like electric vehicle batteries. Innovations such as Samsung’s silver-carbon composite in EV batteries could significantly increase silver consumption.
• Price Forecasts: Based on the historic ratio of gold to silver prices, and on the tendency for that ratio to mean revert over time, projections suggest silver prices could reach between $40 and $50 per ounce within the next few years – particularly if gold continues its run.

Important Note: this Quick Bite is not meant to be a recommendation. “All forecasts are wrong, but some may be useful”. Hopefully, these insights aid you in your own deliberations – or better still, with the advice of a specialist investment adviser.